Just last week, the court has reached a FRAND rate for Motorola's SEP and this has served a huge blow to Google. This is because the FRAND rate will affect Google's ability to generate licensing revenues, which they had optimistically accounted for when purchasing Motorola. This inability to generate as much revenues meant that Google's ROI from its Motorola purchase has dropped significantly. In fact, it is calculated that it will take around 7000 years to make back the $12.5Billion it paid from licensing the SEPs to Microsoft. This of course will be impossible, because the patents would have expired way before then.
Apart from this poor revenue stream from licensing, Google additionally burdens its financials with funding lawsuits. They are involved in patent lawsuits where its expected returns if they win do not surpass its cost of litigation by much.
This all may not make financial sense, but I am sure there is a strategic reasoning behind these moves that Google has taken. Google can definitely afford such a loss in the short term, and these deals might allow it to gain much more in the long term through signals of strength sent to its competitors. Motorola might also provide other strategic benefits aside from those patent related.
It's sad that Google went into this deal thinking it would financially benefit them in the long run. However, they are losing a LOT of money from the deal and from spending on legal fees. I wonder if Google will place the burden of their expenses on the end market user, i.e. people who buy motorola phones (like the price will increase). I wonder how this will play out
ReplyDeleteI don't think that Google purchased Motorola in order to license and monetize its patents; rather, it is using the Motorola patents as a defensive strategy, in order to successfully protect the Android ecosystem. Because patents have both offensive monetization and defensive potential, their worth shouldn't just be measured in terms of their financial returns, but should be considered strategic assets that companies can leverage to affect the product portfolios of their competitors.
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